# Economics (318) - April' 2012 | NIOS SENIOR SECONDARY Solved Papers

## ECONOMICS (April’ 2012)(318)NIOS SENIOR SECONDARY Solved PapersTime: 3 HoursMaximum Marks: 100

Note : (i) This Question Paper consists of two Sections, viz., ‘A’ and ‘B’.
(ii) All questions from Section ‘A’ are to be attempted.
(iii) Section ‘B’ has got more than one option. Candidates are required to attempt questions from one option only.
SECTION–A
1. What is meant by market demand?                                 2
Ans.:- Market demand is the total amount of goods and services that all consumers are willing and able to purchase at a specific price in a marketplace. In other words, it represents how much consumers can and will buy from suppliers at a given price level in a market.

2. If total revenue at 2 units of output is Rs 200, what is average revenue?              2
Ans.:- Average revenue = total revenue / output
Average revenue = 200/2
Average revenue = 100

3. How is net domestic product at factor cost obtained from gross domestic product at market price?                   2
Ans.:- Indirect taxes minus subsidies are added to get from factor cost to market prices. Depreciation (or capital consumption allowance) is added to get from net domestic product to gross domestic product.

4. Calculate gross value added at market price from the following:                       2
a)            Value of output = Rs 1,500
b)            Intermediate consumption = Rs 700
Ans.:- Gross value added at market price = output – intermediate consumption
= 1500 – 700
= 800

5. What does ‘excess supply’ of a commodity mean?                2
Ans.:- In economics, an excess supply or economic surplus is a situation In which the quantity of a good or service supplied is more than the quantity demanded, and the price is above the equilibrium level determined by supply and demand.

6. How is the midpoint of a class interval obtained?                                           2
Ans.:- The midpoint of a class  interval obtained by dividing the sum of the upper and lower limits by 2 for example if the class interval is 10-20 than the midpoint will be 30/2= 15

7. What are intermediate goods?                           2
Ans.:- Intermediate goods are items that we use to create another products or the ingredients of finished goods. Suppliers of intermediate goods sell them to, for example, manufacturers for the inclusion in their final products.

8. If total variable cost for one unit is Rs 60, what is average variable cost?                  2
Ans.: If total variable cost for one unit is Rs. 60, than the average variable cost will also be Rs.60 because average variable cost = total variable cost / output or unit, therefore 60/1 = 60

9. State the law of demand.                                                     2
Ans.:- In microeconomics, the law of demand stats that, “conditional on all else being equal, as the price of a good increases, quantity demanded decreases, conversely, as the price of a good decreases, quantity demanded.” In other words, the law of demand describes an inverse relationship between price and quantity demanded of a good.

10. Distinguish between consumer goods and producer goods. Give examples.                  5
Ans.:- Difference between consumer goods and producer goods are given below:-
Consumer goods:
a)      Those goods that are purchased or available in the market to satisfy the human need are called consumer goods.
b)      It is the good which is produced at the end of the production line.
c)       In wine making process, the wine is called as consumer good.
Producer goods:
a)      Those goods that are available in the market and are purchased as raw material to produce another product, it is called as producer goods.
b)      It is the good which is used in the beginning of the production line.
c)       In the wine making process, as grapes are used in the preparation of wine, they are called as producer goods.

11. What is government budget? State three features of a government budget.               5
Ans.:- A government budget is an annual statement presenting the revenues and spending for a financial year that is often passed by the legislature, approved by the chief executive or president and presented by the Finance Minister to the nation. The budget is also known as the Annual Financial Statement of the country.
Features of government budget are:-
(i)      It is a statement of estimates of government receipts and expenditure.
(ii)    Budget estimates pertain to a fixed period, generally a year.
(iii)   Expenditure and sources of finance are planned in accordance with the objectives of the government.

12. Explain the term ‘factor income’. Give two examples.          5
Ans.:- Factor income is income we receive from at least one of the four factors of production. The factors of production are the building-blocks of the economy. Factors of production are the inputs we use to produce things so that we can make a profit.
Economists divide the factors of production into four different categories: Land, Labor, capital and Enterprise.
Each factor of production, when we put it into use, provides us with an income, i.e., a factor income.
Examples:- “Returns received on factors of production: rent is return on land, wages on labor, interest on capital, and profit on entrepreneurship.”

13. Distinguish between substitute goods and complementary goods. Give examples.          5
Ans.:- The differences between the substitute goods and complimentary goods are:-
1. Substitute goods are independent to each other while as complementary goods are inter-dependent.
2. If the price of one good increases, the demand of its substitute good increases while on the other hand it the price of good increases, the demand of its complementary good decreases.
3. Cross elasticity of the substitute goods will be positive while as cross elasticity of complementary goods is negative.
4. Tea and Coffee is an example of substitute goods while as car and petroleum is an example of complementary goods.
5. Complementary goods are mostly sold in combination while as substitute goods are mostly sold in singularity.

14. Explain the concept of domestic territory of a country.                 5
Ans.:- Domestic Territory of a Country: By domestic territory, a layman means political frontiers of a country but in national accounting it is used in a wider sense. Domestic territory, as used in national accounting, has a special meaning and is much bigger than the political frontiers of a country. According to United Nation,” Economic territory is the geographical territory administered by a government within which persons, goods and capital circulate freely. “Clearly, freedom of circulation of persons, goods and capital is the basic criterion of economic territory for including in it. Thus, those parts of political frontiers of a country whose government does not enjoy these freedoms (e.g. embassies) are deemed to be outside the economic territory. Income generated within domestic territory during a year is called domestic income. Mind, embassies are not included in domestic territory as they are not administered by the government of the country in which they are located. Again note that domestic territory is also called economic territory.

15. What is meant by economic planning? State any four objectives of economic planning in India.                        5

Ans.:- Economic planning is the marking or major economic decision, what and how much is to be produced, and to whom it is to be allocated by the conscious decision of a determinate authority, on the basis of a comprehensive survey of the economic system as a whole.

Major objectives of economic planning in India:-

(1)    Economic Growth:-  Attainment of higher rate of economic growth received topmost priority in almost all the Five Year Plans of the country. As the economy of the country was suffering from acute poverty thus by attaining a higher rate of economic growth eradication of poverty is possible and the standard of living of our people can be improved.

(2)    Attaining Economic Equality and Social Justice:- Reduction of economic inequalities and eradication of poverty are the second group of objective of almost all the Five Year Plans of our country particularly since the Fourth Plan. Due to the faulty approach followed in the initial part of our planning, economic inequality widened and poverty became acute.

(3)    Achieving Full Employment:- Five Year Plans of India gave importance on the subject to employment generation since the Third Plan. The generation of more employment opportunities was considered as an objective of both the Third and Fourth Plan of our country. But up the Fourth plan employment generation never received its due priority. The Fifth Plan in its employment policy laid special emphasis in absorbing increments in labour force during this Fifth Plan Period.

(4)    Attaining Economic Self-Reliance:- One of the very important objectives of Indian Planning is to attain economic self-reliance. But this objective attained its importance only since the Fourth Plan, when the plan aimed at elimination of the import of food-grains under PL480. The Fifth Plan also laid much importance on the attainment of self-reliance.

16. Following are marks obtained by 20 students of a class. Calculate the arithmetic mean by direct method :   5

 Marks (out of 100): 40 50 60 70 No. of students: 5 5 6 4

17. Give three reasons why economic problems arise and explain them.   8

Ans.:- An economic problem is basically the problem of choice which arises because of scarcity of resources. Human wants are unlimited but means to satisfy them are limited. Therefore, all human wants cannot be satisfied with limited means. Wants differ in intensity and limited resources have alternative uses. In such a background, every consumer tries to satisfy his maximum wants. Therefore, one has to choose as to what goods one should consume and in what quantity. Economic problem arises the movement problem of choice arises. Actually speaking, economic problem is basically the problem of choice.

Because of scarcity, every economy has to face three basic economic problems:-

A)     What to Produce:-  Since we do not have enough resources, we have to decide what types and what quantities of goods are to be produced.

B)      How to Produce:- To economize the scare resources, i.e., to produce the maximum output with a given amount of resources, we have to decide what method of production are to be employed.

C)      For Whom to Produce:- Since the goods services produced are not sufficient, there is a problem of how to allocate them among the people.

18. What was the main objective of New Economic Policy of 1991? Explain the terms ‘liberalization’, ‘privatization’ and ‘globalization’.                     8

Ans.:- The main objectives to launch new economic policy (NEP) in 1991 are as follows: The main objective was to plunge Indian economy in to the field of ‘Globalization and to give it a new drive on market orientation. The new economic policy intended to reduce the rate of inflation and to remove imbalances in payment.

Liberalization:- Liberalization is the lessening of government regulations and restrictions in an economy in exchange for greater participation by private entities; the doctrine is associated with classical liberalism. Thus, liberalization in short is “the removal of controls” in order to encourage economic development.

Privatization:-The transfer of ownership, property or business from the government to the private sector is termed privatization. The government ceases to be the owner of the entity or business. The process in which a publicly-traded company is taken over by a few people is also called privatization.

Globalization:- Globalization is a process of interaction and integration among the people, companies, and governments of different nations, an process driven by international trade investment and aided by information technology. This process has effects on the environment on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world.

19. Explain any two measures that Reserve Bank of India can adopt to decrease money supply.   8

Ans.:- RBI controls money supply in the market through various tools and measures:-

CRR- Cash Reserve Ratio is the proportion of total deposits that the banks are required to maintain with the RBI has reserves. By changing this ratio RBI can influence the amount of cash that is available for the banks to lend.  A high CRR implies less money to lend, thus contraction in money to lend, thus contraction in money supply. A low CRR enables banks to hold more cash with them, which is then available to lend. Thus, expanding  the money supply.

Open Market Operation- It is the sale/purchase of the government bonds and securities in the market to adjust the rupee liquidity. For example, when RBI sells government bonds/securities, people buy them against money (say cash) this leads to a contraction in money supply as money moves from public to RBI. In case of purchases, money supply expands.

20. Distinguish between primary and secondary data. List two methods of collecting primary data and give two sources of secondary data.                       8

Ans.:- .:- The following are the differences between primary data and secondary data:-

 Basis Primary Data Secondary Data Definition Primary data are those data which are collected originally. Secondary data refer to those data which are collected through other sources. Nature of data Primary data are in the form of raw-material to which statistical methods are applied. Secondary data are in the form of finished product as they have already been statistically applied. object Primary data have been collected for a definite purpose. Secondary data are collected from published or unpublished sources. Time and money A lot of time and money is required for collection of primary data. Since secondary data are collected through other sources, so both time and money are saved.

Two methods of collecting primary data are:

1)      Direct Personal Investigation:- Under this method, data are collected personally by the investigator. Data are collected by asking questions relating to the enquiry. The investigator has to go to the spot and has to meet person concerned.

2)      Indirect Oral Investigation:- Under this method, the investigator collects the facts by interviewing persons not those from whom information is to be collected instead he makes contacts with some other persons who are directly or indirectly in touch with them. Indirect oral investigation is usually adopted in those cases where information through direct sources is not possible or is less reliable.

Two sources of secondary data are:

1)      Published sources:-  The various sources of published data are (i) Government Publication- Government publications are the major sources of secondary data . different ministries and government departments regularly collect and publish data which are very useful and reliable. (ii) Research Publications- Research institutions also publish their research work. They provide us very useful data. Publication of universities, research institutes and individuals fall in this category.etc.,

2)      Unpublished Sources:- Secondary data are also available from unpublished sources, because all statistical material is not always published. For example, information recorded in various government and private offices studies made by research institutions, scholars etc., can be important sources of secondary data.

SECTION–B

OP TION–I

( Role of Agriculture and Industry in India’s Economic Development )

21. Given that 50 quintals of wheat are produced on 2 hectares of land. What is the productivity of land?           2

Ans.:-

22. State and explain briefly any two factors affecting industrial growth.      5

Ans.:- Two factors affecting industrial growth are:-

1)      Technological Development :- Technological development plays an important part to influence the industrial productivity. “The application of motive power and mechanical improvements to the process of production has accelerated the peace of industrialization to an unprecedented degree, and has given us the vision of the vast and unexplored frontiers that still lie ahead of us in the realm of applied science and technology.” The technological factors include degree of mechanization, technical know-how, product design, etc. improvement in any of the technological factors will contribute towards the increase in industrial productivity.

2)      Quality of Human Resources:- Manpower plays a significant role. In raising industrial productivity in most of the industries. If the labor force is not adequately qualified and /or is not properly motivated, all the steps taken to increase the industrial productivity will have no result the employees’ performance and attitudes have an immense effect on the productivity of any industrial unit. Three important factors which influence the productivity of labour are (a) ability of the worker, (b) willingness of the worker, and (c) the environment under which he has to work.

23. Explain any four ways how the industrial sector is dependent on the agricultural sector.      8

Ans.:- Industry which is, no doubt, important, will not progress unless agriculture is sound, stable, and progressive. Because of this interdependence these sectors are complementary, and not competitive. In the development of an underdeveloped economy, there is as such no conflict between agricultural and industrial development.

Interdependence between agriculture and industry becomes strengthened through various linkages generated in these two sectors. The three most important linkages are : production linkages, demand linkages, and saving-investment linkages.

Production linkages arise from the interdependence between agriculture and industry through the use of productive inputs. Many raw materials and inputs used in industrial production, e.g., cotton, jute, sugarcane, tobacco, etc., is supplied by the agriculture sector. Such production linkages demonstrate the at a 10 percent increase in agricultural output results in a increase in industrial output by as much as 5 percent.

Demand linkages, in the urban areas, we see some sort of demand saturation of some of  products of consumer goods industries. The impact of rising urban income and industrialization has a favorable impact on demand for food, vegetable, fruits, various raw materials produced in the agricultural sector. It has been an article of faith in India that the demand stimulus for industrial expansion would likely come mainly from agriculture with low social and economic costs.

Finally, there is a savings-investment linkage between these two sectors. A self-reliant agriculture capable of exporting surplus food-grains helps in saving scarce foreign exchange resources of the country. Now these resources can be better utilized for importing capital goods and crucial raw materials needed for industrialization effort.

As agricultural production and productivity rises above the subsistence requirement, the volume of marketable surplus increases which provides sinews of industrialization, particularly in the rural sector. Again, the rising volume of savings and capital formation consequent upon rising farm incomes give strong stimulus to demand for manufactured goods. Investment of other sectors up thereby accelerating overall growth rate of the economy.

OPTION–II

( Population and Economic Development )

21. What is meant by dependency ratio?                   2

Ans.:- The dependency ratio is a measure of the number of dependents aged zero to 14 and over the age of 65, compared with the total population aged 15 to 64. This indicator gives insight into the number  of people of nonworking age, compared with the number of those of working age.

22. Why has the density of population in India been increasing? Explain.   5

Ans.:- Causes of Over Population

The two main common causes leading to over population in India are:

1)      The birth rate is still higher than the death rate. We have been successful in declining the death rates but the same cannot be said for birth rates.

2)      The fertility rate due to the population policies and other measures has been falling but even then it is much higher compared to other countries.

The above causes are interrelated to the various social issues in our country which are leading to over population.

a)      Early Marriage and Universal Marriage System:- Even though legally the marriageable age of a girl is 18 years, the concept of early marriage still prevails and getting married at an young age prolongs the child bearing age. Also, in India, marriage is a sacred obligation and a universal practice, where almost every woman is married at the reproductive age.

b)      Poverty and Illiteracy:- Another factor for the rapid growth of population is poverty. Impoverished families have this notion that more the number of members in the family, more will be the numbers to earn income. Some feel that more children are needed to look after them in their old age. Also hunger can be cause of death of their children and hence the need for more children. Strange but true, Indian still lag behind the use of contraceptives and birth control methods.

c)       Age old cultural norm:- Sons are the bread earners of the families in India. This age old thought puts considerable pressure on the parents to produce children till a male child is born. More the better.

d)      Illegal migration:- Last but not the least, we cannot ignore the fact that illegal migration is continuously taking place from Bangladesh, Nepal leading to increased population density.

23. Describe the effects of population growth on natural resources of a country.   8

Ans.:- Nature and natural resources are destroyed as human populations grow and require more space for habitation and farming, and more fuel for cooking. Demand for cultivable land, fuel wood/charcoal and other forest products, arising from the needs of the non-agricultural (mostly, urban) population and the export sector.

Population growth is responsible for degradation of nature and natural resources. Population growth has become a major force behind nature degradation in many rural and urban environments. The equality of the environment is constantly losing its status due to increase in population growth in most countries of world. Environmental degradation is a situation where the environment loses its natural equilibrium. Population has been a chief agent of environmental degradation in most cities of the world. He further explain that man main occupations were hunting and gathering of fruits but later as human population increased, man invented new techniques which has constitute great menace to the natural environment. Population growth is these communities have lead to increasing environmental problems such as loss of plant and animal species, pollution, air pollution, soil infertility among others.

Nature and natural resources are destroyed as human population grow and require more space ofr habitation and farming, and more fuel for cooking. In many cases the local people lost their traditional power over the groves, and their groves have been opened up to commercial forestry.

***